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Tuesday, September 13, 2016

Hard Time For Gold Bugs

It looks like precious metals stocks (represented by GDX) do not track gold anymore. Look at the chart below:

The chart shows the US broad stock market (represented by the S&P 500 index) and GDX. Both charts are positively correlated which means that GDX behaves like S&P 500. To give my readers a bigger picture - today gold is down 0.3% but GDX, following S&P 500 (dropping 1.6%) is down 4.1%. Well, it is not a nice picture for gold bugs. In the ultra short - term perspective precious metals stocks do not offer any value. Generally, gold itself is considered as a safe heaven. When there is a mess in the broad stock market the demand for gold rises. Gold stocks should follow the gold itself. Now, this rule does not work and gold stocks are going down together with regular stocks.As usually, I do not have any idea why the market behaves in that way. However, if I were to comment I would say:It looks like precious metals stocks are in weak hands now. Therefore those betting on the continuation of the upward trend in gold should...forget about these fluctuations. Weak hands must go empty handed. Then the prices of precious metals stocks should renew their march up, no matter what the broad stock market does.

Disclaimer

This blog is not an investment advice. I am not a registered investment advisor. Under no circumstances should any content from this blog be used or interpreted as a recommendation for any investment or trading approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational purposes only.